Jobs and trade data show improving economy

A woman browses job openings at a job fair in Los Angeles, October 12, 2010.

WASHINGTON (Reuters) - Economic growth showed more tentative signs of improving on Wednesday as jobless benefit claims hit a four-month low last week and the international trade gap narrowed in September.

The reports followed last Friday's payrolls data showing private sector job growth was the best for any month since April, suggesting the economy may be beginning to pull out of its summer doldrums.

"Two months ago, three months ago there was a real growth scare and people were talking about a double dip (recession)," said Jim O'Sullivan, chief economist at MF Global in New York. "Now, the numbers are not only not showing double-dip, but they're showing reacceleration."

The number of workers filing new claims for state unemployment aid fell to 435,000 in the week ended November 6 from a revised 459,000 in the prior week, the Labor Department said. Economists had looked for claims to come in at 450,000.

The bigger-than-expected drop took a four-week moving average of claims, a better indicator of underlying trends, to its lowest level since just before Lehman Brothers filed for bankruptcy in September 2008.

At the same time, the number of people still receiving regular state benefits after an initial week of aid fell to 4.3 million in the week ended October 30, the lowest level since November 2008.

Still, analysts say the pace of job creation is not enough to pull down the United State's 9.6 percent unemployment rate.

Concern over the anemic job market was a factor behind the Federal Reserve's decision last week to pump an extra $600 billion into the U.S. economy through Treasury bond purchases.

Late Wednesday leading technology company Cisco Systems Inc (CSCO.O) reported a 19 percent jump in quarterly revenue, as more businesses upgraded their networks to handle growing Internet traffic in another sign of a recovering economy.

CHINA IMPORTS STILL NEAR RECORD

In a separate report, the Commerce Department said the U.S. trade deficit narrowed more than expected in September to $44.O billion, despite near record imports from China.

A narrower trade deficit is positive for U.S. economic growth since it suggests more demand for U.S. production.

Financial markets, however, largely shrugged off the data. Worries over Ireland's debt load helped push the U.S. dollar to one-month high against the euro and the yen early, and stocks ended little changed, as did U.S. Treasury yields.

Economists said the international trade report suggested the U.S. economy grew a bit more swiftly in the third quarter than the 2.0 percent annual pace reported late last month.

Many also said the trade deficit, which cut into growth last quarter, could be a positive in the final three months of the year. O'Sullivan said the drop in jobless claims suggests growth could pick up to 3.0 percent as the year draws to a close.

U.S. exports rose slightly in September, a third consecutive monthly gain. Imports fell 1.0 percent.

The rise in exports and decline in imports suggests a drop in the value of the U.S. dollar "might be beginning to weave its magic," said Hugh Johnson, chief investment officer of Hugh Johnson Advisors in Albany, New York.

A weaker dollar helps U.S. exporters by making American products cheaper in world markets, at the same time increasing the cost of foreign goods in the United States.

But continued high imports from China cast a shadow over the data. U.S. imports from China totaled $35.0 billion, just barely below a record set in August, while U.S. exports to the country declined fractionally to $7.2 billion.

The resulting $27.8 billion trade deficit with China, by far the largest the United States had with any trade partner, could revive chances for the Senate to vote on legislation punishing some Chinese imports for Beijing's currency practices.

The House of Representatives approved the bill in September in the belief that China deliberately undervalues its currency to give Chinese companies an unfair trade advantage.

While many observers believe the bill will fall by the wayside following the November 2 congressional elections, some think its fate depends on whether President Barack Obama can make progress on the issue at a Group of 20 summit that gets underway in Seoul on Thursday.

The U.S. trade gap with China has swelled to $201.2 billion in the first nine months of 2010, compared to $165.9 billion in the same period in 2009.

Washington is pushing Beijing to let its currency rise more quickly in value and take other steps to spur domestic demand. On Wednesday, China ordered its banks to put more money aside as required reserves, a move that could slow Chinese growth.

(Additional reporting by Mark Felsenthal in Washington and Ryan Vlastelica in New York, Editing by Andrew Hay)